As a wave of selling in artificial intelligence stocks swept from Wall Street across Asia, India stood out as one of the few major markets to hold its ground, with investors betting that the country could be a relative winner if the global AI investment boom slows.
The BSE Sensex traded at 79,460.30 on Friday morning, November 6, up 150.29 points or 0.19%, while the NSE Nifty 50 was little changed at 24,516.10, down 20.50 points or 0.08%, according to Business Today. The Sensex had risen 2.6% the previous day.
The calm in Mumbai contrasted with turmoil elsewhere. The Nasdaq 100 fell 6.4% on Thursday, wiping out $2.3 trillion in market value in its worst session since March 2020, according to Business Today. On Friday, South Korea's Kospi fell as much as 8.8%, triggering a circuit breaker, and Japan's Nikkei 225 dropped about 5.7%.
"The bloodbath in the US markets impacted most other markets today, but India was least impacted," said V K Vijayakumar, chief investment strategist at Geojit Investments.
IT stocks rally
Indian information technology stocks, which have underperformed for much of the AI boom, were among the day's gainers. Bharti Airtel, HCL Technologies, Tata Consultancy Services and Infosys each rose between 1.5% and 1.85%, according to Business Today.
The rally reflects a so-called "reverse AI" trade. For the past three years, global investors have poured money into chip makers, data centre operators and AI infrastructure companies, largely bypassing India, which has few listed companies in those sectors. Indian IT services companies, meanwhile, have faced concerns that AI could automate parts of their business.
If AI infrastructure spending slows, the argument goes, money could flow back into markets and sectors that missed out on the AI rally, including India. Vijayakumar said the slowdown in the AI trade "will turn out to be beneficial for India."
Foreign investors return
Foreign portfolio investors (FPIs) were heavy buyers of Indian equities. They bought ₹13,801.83 crore of stocks on Thursday, according to provisional data cited by Business Today, while foreign institutional investors bought ₹35,781 crore over the previous five trading days, according to Vijayakumar.
The buying marks a notable shift. Foreign investors had been cautious on Indian equities for much of the year, as they favoured markets with greater exposure to AI, such as the United States, Taiwan and South Korea, and as high valuations, a weak rupee and slower earnings growth weighed on India's appeal.
Domestic institutional investors, by contrast, sold and booked profits, according to Business Today.
Strong earnings help
Indian stocks were also supported by strong corporate results. Mahindra & Mahindra rose 3.68% to ₹3,242.60, the top gainer on the Nifty, after reporting better-than-expected second-quarter results, according to Business Today. Titan rose 2.32% to ₹4,946.90 after its own strong results.
Several of India's largest companies reported robust earnings on November 5, including Bharti Airtel, Life Insurance Corporation of India, ONGC and Britannia, adding to evidence that corporate India's profit growth is holding up.
What drove the global sell-off
The global rout was triggered by fears that the results of the US midterm elections will slow the construction of AI data centres. Democrats made sweeping gains, according to reports, including in states such as Texas that host large shares of planned data centre capacity, raising the prospect of moratoriums or tougher approval requirements.
Business Today also cited concerns about tighter AI regulation, competition with China, high interest rates, elevated oil prices and mixed results from US AI companies.
Nomura offered some reassurance. "A federal data centre moratorium looks unlikely given divisions within the party and the presidential veto," the brokerage said, although it noted a state-level "temporary pause" is possible.
The risks for India
Not everyone believes India will be immune. Hariselvan Radhakrishnan, founder and chief executive of HST Wealth, said the immediate pressure for India is likely to fall on IT and other globally sensitive stocks, according to Business Today. If global deleveraging persists, he warned, it could eventually hit domestic sectors through foreign selling.
India's market is not entirely insulated from global shocks. A sharp slowdown in the US economy would hurt Indian exporters and IT companies, and a broad flight from risk could prompt foreign investors to pull money out of emerging markets, including India.
Why India is different
India's relative resilience reflects the structure of its market. Unlike South Korea and Taiwan, whose stock markets are dominated by semiconductor giants such as Samsung Electronics, SK Hynix and TSMC, India's market is weighted towards banks, consumer companies, energy, IT services and industrials. It has relatively little direct exposure to the AI hardware boom.
India's market is also increasingly driven by domestic investors. Monthly systematic investment plan (SIP) flows into mutual funds have provided a steady source of buying, reducing the market's dependence on foreign capital.
The rupee and oil
India's macroeconomic picture has been mixed. The rupee has weakened to record lows this year amid high oil prices and foreign outflows. Oil prices fell sharply on Wednesday on hopes that the US election result could hasten an end to the conflict involving Iran, but rebounded on Friday, with Brent crude up 1.4% to $99.70 a barrel, according to FinancialJuice. As a major oil importer, India benefits from lower oil prices, which reduce inflation and improve its trade balance.
IT sector outlook
For India's IT services industry, the AI debate is complex. AI could reduce demand for some traditional services, such as coding and testing, but it also creates new opportunities in helping companies adopt and integrate AI. A slowdown in AI infrastructure spending could free up corporate technology budgets for other projects, potentially benefiting IT services providers.
Indian IT companies have reported modest growth in recent quarters, and their valuations have fallen relative to the broader market, which may make them attractive to investors seeking value.
The domestic investor cushion
The steady flow of money from Indian households into equities has changed the market's dynamics. When foreign investors sell, domestic mutual funds, insurers and retail investors have increasingly absorbed the selling, reducing the volatility that once characterised Indian markets during global sell-offs. This domestic base gives India a buffer that many other emerging markets lack.
What comes next
Investors will watch the US jobs report on Friday evening, Indian time, as well as further developments in US data centre policy. Continued foreign buying would provide strong support for Indian stocks, but a deepening global sell-off could test the market's resilience. For now, India's ability to weather the storm has reinforced its reputation as a market driven by domestic fundamentals rather than global AI enthusiasm.
